This week’s announcement by the Treasurer means an end to the concessional tax treatment of ‘in-house benefits’ used in salary packaging arrangements.
As of the 22nd of October, no new in-house benefit arrangements may be entered into, but for those who have existing in-house benefits in place, these arrangements can continue until 1 April 2014.
For one salary packaging expert, the end of the tax concession is sad news for employees and employers alike, and came without warning. “In-house benefits have allowed some employees to purchase up to $1,333.00 per annum tax free of either goods or services that their employer provides to the general public. It was essentially seen as a benefit that employees received for buying directly from their employer,” Jim McNeilly from Selectus said. He added that many employees saw the tax savings received from in-house benefits as a reward for supporting their employer.
Depending on their taxable salary, most employees will lose between $453 and $620 per annum. The majority of employees who utilised the in-house benefits were middle income earners with salaries of between $50,000 and $80,000.
McNeilly told HC that the move by Treasury was unexpected, and the first employers heard of this was in the actual Treasury announcement.